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The recent act of Demonetization attracted a lot of attention. The immediate reaction of the public was showing disagreement for the government action and there’s a perfectly good economic reason behind it.

According to us, Government had two choices:
1st choice: To act on the decision of demonetizing currency which might lead to lesser amount of black money in the economy or maybe lead to even more chaos.
2nd choice: To not take any action and everything stay where it already is.

We always have two choices: whether to perform a particular act or do not perform it. We usually think about the consequences that will follow after performing it, and never generally give weight to the act of not performing. We are accustomed to put more weight on our harmful actions and less on our inactions.  And, therefore the obvious human reaction was to stand against the government action without even realizing the effects of no action.

Do you think letting someone die is as bad as killing? Do you think not telling the truth is as bad as lying? Well, we all will consider the latter more harmful than the former. Studies have proven that humans often rate harmful omissions as less immoral, or less bad as decisions, than harmful commissions. A case has been illustrated below for better understanding:

Mr. A has two patients in front of him, suppose it is an obligation for him to kill one of them, the first patient is ill and would need a certain medicine to stay alive and the second patient is perfectly healthy as of now. There are two choices in front of him:
1st choice: Kill the second patient and save the first one by giving him the medicine.
2nd choice : Don’t do anything and let the first patient die.

When asked about which choice is better, people usually opted for the second one because it seemed less bad/immoral or less guilty. But if we analyse both the situations, we’ll understand that both of them lead to the same consequence, death. Then, why is the second choice less bad? Maybe because the first choice required some action, and action always attracts attention which leads to judgement while our inaction never puts us in the spotlight.

But is playing safe always the best option?
Patrick Doyle, CEO of Dominos Pizza in his talk at the CEO Summit organized by Business Leaders for Michigan stated that “ Leaders who want to shake things up have to be comfortable with the idea that failure is an option. In a world of hyper-competition and nonstop disruption, playing it safe is the riskiest course of all.”

So, while we are customarily more inclined towards taking no action to stay in the safe zone, we must not forget the opportunity cost of no action.

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